A comparative analysis of the US and EU retail banking markets - Wsbi
A comparative analysis of the US and EU retail banking markets - Wsbi
A comparative analysis of the US and EU retail banking markets - Wsbi
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4.2.5.2.2 The “universal <strong>banking</strong>” model<br />
A key feature <strong>of</strong> <strong>the</strong> Second Banking Directive relates<br />
to <strong>the</strong> fact that <strong>the</strong> activities in which credit<br />
institutions can engage are defined exhaustively 195 .<br />
The model promoted by <strong>the</strong> Directive, <strong>and</strong> imposed<br />
throughout <strong>the</strong> <strong>EU</strong>, is <strong>the</strong> “universal <strong>banking</strong>” model,<br />
as <strong>the</strong> Directive foresees that credit institutions can<br />
engage in activities such as “Acceptance <strong>of</strong> deposits<br />
<strong>and</strong> o<strong>the</strong>r repayable funds”, “lending”, “Trading for<br />
own account or for account <strong>of</strong> customers” or<br />
“Safekeeping <strong>and</strong> administration <strong>of</strong> securities”.<br />
It should be noted that before <strong>the</strong> adoption <strong>of</strong><br />
<strong>the</strong> Directive, important differences existed from<br />
Member State to Member State, as whereas in some<br />
countries strict limitations were imposed as regards<br />
to authorised activities for banks, in o<strong>the</strong>r countries<br />
<strong>the</strong> model was already that <strong>of</strong> universal <strong>banking</strong>.<br />
The Directive has thus been a key milestone in terms<br />
<strong>of</strong> <strong>the</strong> creation <strong>of</strong> a level playing field in <strong>the</strong> <strong>EU</strong><br />
<strong>banking</strong> sector.<br />
Noteworthy is also <strong>the</strong> fact that <strong>the</strong> activities defined<br />
in <strong>the</strong> Directive apply to <strong>the</strong> institutions defined as<br />
“credit institutions”, which includes institutions<br />
such as banks, savings banks <strong>and</strong> cooperative banks.<br />
Concretely, this means that whereas <strong>the</strong> legal<br />
environment <strong>of</strong> individual Member States can foresee<br />
specific features for <strong>the</strong> different categories <strong>of</strong> credit<br />
institutions, <strong>the</strong> activities in which <strong>the</strong>se can engage<br />
are <strong>the</strong> same <strong>and</strong> are those defined by <strong>the</strong> Directive.<br />
4.2.5.2.3 Most recent regulatory trends:<br />
more detailed rules, based on<br />
international st<strong>and</strong>ards<br />
The 1929 crash in <strong>the</strong> New York Stock Exchange<br />
also triggered reforms on <strong>the</strong> European side <strong>of</strong> <strong>the</strong><br />
Atlantic. In particular, in a number <strong>of</strong> European<br />
countries, measures were taken that strictly regulated<br />
<strong>the</strong> activities in which <strong>the</strong> different categories <strong>of</strong><br />
actors in <strong>the</strong> financial area were allowed to engage.<br />
It is also in that period that some European countries<br />
decided to set up supervisory agencies, in <strong>the</strong> <strong>banking</strong><br />
<strong>and</strong> securities areas.<br />
As indicated, <strong>the</strong> second <strong>banking</strong> Directive has<br />
imposed <strong>the</strong> universal <strong>banking</strong> model across Europe,<br />
extending in many cases <strong>the</strong> activities in which banks<br />
were allowed to engage <strong>and</strong> s<strong>of</strong>tening <strong>the</strong> limits<br />
imposed previously. From that perspective, <strong>the</strong><br />
adoption <strong>of</strong> <strong>the</strong> second <strong>banking</strong> directive in 1989<br />
can be regarded as <strong>the</strong> peak <strong>of</strong> a period <strong>of</strong><br />
deregulation that started in <strong>the</strong> 1970, <strong>and</strong> that<br />
followed a period a regulation initiated in 1929 with<br />
<strong>the</strong> great depression.<br />
The 1980’ <strong>and</strong> to a greater extent <strong>the</strong> 1990’ has also<br />
been a period <strong>of</strong> adoption <strong>of</strong> complex, detailed <strong>and</strong><br />
<strong>of</strong>ten burdensome regulation in <strong>the</strong> <strong>banking</strong> area,<br />
which very <strong>of</strong>ten originated in international fora.<br />
The Basel I accord, replaced recently by <strong>the</strong> much<br />
more complex <strong>and</strong> comprehensive Basel II framework,<br />
is probably <strong>the</strong> most well-known example <strong>of</strong> such<br />
regulation, whose aim is to enhance <strong>the</strong> soundness<br />
<strong>of</strong> <strong>the</strong> <strong>banking</strong> system worldwide. This has led some<br />
to point out that while credit institutions have been<br />
given more breathing space as regards <strong>the</strong> activities<br />
in which <strong>the</strong>y can engage, <strong>the</strong>y are now more<br />
limited by <strong>the</strong> much stricter prudential requirements<br />
with which <strong>the</strong>y are required to comply, <strong>and</strong> thus<br />
that one type <strong>of</strong> regulation has been replaced by<br />
ano<strong>the</strong>r, new type <strong>of</strong> regulation.<br />
The trend towards <strong>the</strong> development <strong>of</strong> international<br />
st<strong>and</strong>ards accelerated in recent years, with for<br />
instance <strong>the</strong> adoption <strong>of</strong> <strong>the</strong> International Financial<br />
Reporting St<strong>and</strong>ards (IFRS) <strong>and</strong> <strong>of</strong> rules relating to<br />
<strong>the</strong> fight against <strong>the</strong> financing <strong>of</strong> terrorism <strong>and</strong><br />
against money laundering. The <strong>EU</strong> took <strong>the</strong> decision<br />
to include all <strong>the</strong>se new international rules in its own<br />
regulatory framework.<br />
4.2.5.3 Comparison<br />
The <strong>EU</strong> countries <strong>and</strong> <strong>the</strong> <strong>US</strong> have gone through similar<br />
experiences in <strong>the</strong> course <strong>of</strong> <strong>the</strong> 20th Century, <strong>of</strong>ten<br />
deciding to apply similar solutions to similar problems.<br />
As an illustration, <strong>the</strong> 1929 crash in Wall Street has<br />
led many countries around <strong>the</strong> world to regulate<br />
more strictly <strong>the</strong> area <strong>of</strong> financial services, while both<br />
in Europe <strong>and</strong> in <strong>the</strong> <strong>US</strong> <strong>the</strong> 1980’ have been an<br />
important period <strong>of</strong> deregulation. Likewise, <strong>the</strong> trend<br />
towards <strong>the</strong> introduction <strong>of</strong> increasingly complex<br />
<strong>and</strong> burdensome legislation could be observed in <strong>the</strong><br />
1990’ in <strong>the</strong> <strong>US</strong> <strong>and</strong> in Europe.<br />
195 Annex I to Directive 2000/12/EC <strong>of</strong> <strong>the</strong> European Parliament <strong>and</strong> <strong>of</strong> <strong>the</strong> Council <strong>of</strong> 20 March 2000 relating to <strong>the</strong> taking up <strong>and</strong> pursuit <strong>of</strong> <strong>the</strong> business <strong>of</strong><br />
credit institutions.<br />
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